Super funds urgently need to help retirees, Cbus says

The government and regulators have criticised the super industry’s ‘lack of urgency’ to help retirees, and the boss of one high-profile fund agrees.

Superannuation funds need to act more urgently to cater for retirees as millions of Baby Boomers retire, the Cbus Super boss says.

Cbus chief executive Kristian Fok backed calls for super funds to do more to help their members as they enter retirement, after regulators and the government criticised their “lack of urgency”.

“There does need to be more of a sense of urgency, just look at our demographics,” Mr Fok told The Australian.

“The success of the superannuation industry is that we are starting to get members that are reaching retirement age with balances that are more meaningful.

“But we have to be careful to not overcomplicate things as well, because we could be spending a lot of money that isn’t actually what they want or need.”

Speaking at a superannuation investment conference run by the Australian Institute of Superannuation Trustees, Mr Fok said people in the retirement phase who switch funds often end up worse off.

He said more than half a billion dollars was switched into cash in a single day by Cbus members, many of them pensioners, during Covid, when they lost confidence.

“Many of those people probably only switched out after we announced almost 20 per cent returns, which was then followed by a negative return.”

CBus chief investment officer Kristian Fok. Picture Britta Campion / The Australian

He later added: “It’s unfortunate that it has resulted in probably people feeling better in the short term but suffering a lot more so in the longer term.”

As the government paves the way for super funds to play a greater role in financial advice, Mr Fok said there also needed to be more general education about retirees’ options.

Releasing the Intergenerational Report last week, Treasurer Jim Chalmers flagged changes to retirement products to incentivise retirees to be less cautious about their spending.

Australian Retirement Trust chief investment officer Ian Patrick said super funds had the technology to individualise strategies for retiring members, but there were privacy and security concerns around the data that was needed.

“In the current environment, the appetite or privacy concern issues or cyber risk issues around collecting member data and then putting it at risk, I think is going to inhibit the real evolution of retirement strategies, which should be informed by the quality of data that we can deploy to the problem,” he said.

Mr Patrick said switching the focus from the accumulation phase to retirement, or decumulation, will impact the way funds construct their investment portfolios.

“I think we’ve got a long way to go in that,” he told the Maroochydore conference.

“To me this all comes down to the age-old question of confidence in the superannuation industry first as a vehicle and then the confidence to spend in retirement.”

Mr Patrick said the super industry had been focused on the “accumulation journey”, but expected a “sudden swell of action” on decumulation after the federal government’s Quality of Advice Review and the introduction of a retirement income covenant requiring funds to address their members’ retirement income needs.

“We now have to progress to the job which is how do we provide appropriate solutions for people in decumulation, and particularly the ability to empower themselves through a combination of knowledge and bespoke or crafted strategies to effect that high-quality retirement that we all talk about.”